Trade-Ideas LLC identified

Southern

(

SO

) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Southern as such a stock due to the following factors:

  • SO has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $183.4 million.
  • SO has traded 445,815 shares today.
  • SO is trading at 1.61 times the normal volume for the stock at this time of day.
  • SO crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on SO:

TheStreet Recommends

The Southern Company, together with its subsidiaries, operates as a public electric utility company. The stock currently has a dividend yield of 4.8%. SO has a PE ratio of 19. Currently there is 1 analyst that rates Southern a buy, 2 analysts rate it a sell, and 10 rate it a hold.

The average volume for Southern has been 5.1 million shares per day over the past 30 days. Southern has a market cap of $41.5 billion and is part of the utilities sector and utilities industry. The stock has a beta of 0.22 and a short float of 3% with 6.48 days to cover. Shares are down 7.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Southern as a

buy

. The company's strengths can be seen in multiple areas, such as its increase in net income, expanding profit margins, growth in earnings per share and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Electric Utilities industry average. The net income increased by 2.5% when compared to the same quarter one year prior, going from $628.00 million to $644.00 million.
  • 37.38% is the gross profit margin for SOUTHERN CO which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 14.84% is above that of the industry average.
  • SOUTHERN CO's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, SOUTHERN CO increased its bottom line by earning $2.18 versus $1.87 in the prior year. This year, the market expects an improvement in earnings ($2.85 versus $2.18).
  • Net operating cash flow has increased to $1,194.00 million or 23.47% when compared to the same quarter last year. Despite an increase in cash flow, SOUTHERN CO's average is still marginally south of the industry average growth rate of 24.11%.
  • SO, with its decline in revenue, slightly underperformed the industry average of 1.4%. Since the same quarter one year prior, revenues slightly dropped by 2.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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